NZ Dollar Outlook: Kiwi moves hanging on overseas action

April 7
(BusinessDesk) – The New Zealand dollar will probably take
its direction from overseas sentiment this week, with little
on the local agenda as investors anticipate a rise in
interest rates later this month.

The local currency may
trade between 84 US cents and 87 cents this week, according
to a BusinessDesk survey of 11 traders and strategists. Six
predict the kiwi will fall this week, while one expects it
to gain and four see it largely unchanged. It recently
traded at 86.10 US cents.

Investors are weighing competing
tensions regarding the pace of the US economic recovery, the
potential for softer New Zealand commodity prices, the
impact of a higher local currency on exporters and
expectations for continued hikes in the New Zealand official
cash rate.

“Markets have taken a deep breath ahead of
the OCR review in two weeks which is expected to deliver an
interest rate rise,” said Peter Cavanaugh, client advisor
at Bancorp Treasury. “Globally it is more or less steady
as she goes just waiting for the next round of central bank
decisions or actions.”

Cavanaugh said the kiwi will be
vulnerable to any unexpected shocks this week with no major
events scheduled.

Locally, the main scheduled release is
tomorrow’s Quarterly Survey of Business Opinion published
by the New Zealand Institute of Economic Research. An
optimistic reading could boost the kiwi higher, Cavanaugh
said.

Today, state valuer Quotable Value is scheduled to
publish its latest housing data for March, which will be
eyed for signs Reserve Bank high-debt lending restrictions
introduced in October are cooling the market. The Real
Estate Institute may also publish its latest figures this
week.

Other March data scheduled for release this week
includes electronic card transactions on Wednesday, the
BNZ-BusinessNZ Performance of Manufacturing Index on
Thursday and food prices on Friday.

Treasury releases the
latest crown accounts for the eight months through February
tomorrow.

In Asia, central banks in Japan, Indonesia and
South Korea are expected to keep monetary policy unchanged
following meetings this week, according to Moody’s
Analytics. The Bank of England is also expected to keep
rates unchanged when it meets on Thursday.

In the US,
traders will be eyeing minutes from the latest Federal Open
Market Committee meeting, published early Thursday morning
New Zealand time, alongside speeches by several US policy
makers.

US reports scheduled for release
this week include consumer credit, on Monday; the NFIB small
business optimism index, on Tuesday; wholesale trade, on
Wednesday; weekly jobless claims, as well as import and
export prices, on Thursday; and the producer price index,
and consumer sentiment, on Friday.

In Australia this week,
all eyes will be on Thursday’s employment data for
February and tomorrow’s NAB business confidence survey.
Even though Australia’s unemployment rate probably rose to
6.1 percent in March from February’s 6 percent level, and
employment growth may not beat February’s gain, forward
indicators suggest the labour market is close to troughing,
according to Moody’s Analytics.

In China this week,
March data on monetary aggregates scheduled for release on
Thursday will indicate how increased liquidity in the
interbank market is playing out as banks restrain lending
because of tight balance sheets and fears of defaults,
Moody’s Analytics says.

China is also scheduled to
release March data for foreign trade on Thursday and for
inflation and producer prices on Friday.

Meanwhile, the
International Monetary Fund and World Bank will release
updates to their outlooks ahead of the start of their spring
meetings in Washington on
Friday.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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